WRAPUP 2-Fear, finger-pointing mount over U.S. 'fiscal cliff'

December 23, 2012|Reuters

* Little sign of movement in talks

* Focus shifting to Congress acting after Jan. 1

By Thomas Ferraro and Richard Cowan

WASHINGTON, Dec 23 (Reuters) - Some U.S. lawmakers voicedconcern on Sunday that the country would go over "the fiscalcliff" in nine days, triggering harsh spending cuts and taxhikes, and some Republicans charged that was President BarackObama's goal.

"It's the first time that I feel it's more likely that wewill go over the cliff than not," Senator Joe Lieberman, anindependent from Connecticut, said on CNN's "State of theUnion."

"If we allow that to happen it will be the most colossalconsequential act of congressional irresponsibility in a longtime, maybe ever in American history."

"It looks like to me that obviously this is going to drag oninto next year, which is going to hurt our economy," RepublicanSenator Bob Corker of Tennessee said on CBS "Capitol Gains."

The Democratic president and Republican House ofRepresentatives Speaker John Boehner, the two key negotiators,are not talking and are out of town for the Christmas holidays.Congress is in recess, and will have only a few days next weekto act before Jan. 1.

On the Sunday TV talk shows, no one signaled a change ofposition that could form the basis for a short-term fix, despitea suggestion from Obama on Friday that he would favor one.

The focus was shifting instead to the days following Jan. 1when the lowered tax rates dating back to President George W.Bush's administration will have expired, presenting Congresswith a redefined and more welcome task that involves onlycutting taxes, not raising them.

"I believe we are," going over the cliff, Republican SenatorJohn Barrasso of Wyoming said on Fox News Sunday. "I think thepresident is eager to go over the cliff for political purposes.I think he sees a political victory at the bottom of the cliff."

Some Republicans have said Obama would welcome the fiscalcliff's tax increases and defense cuts, as well as the chance toblame Republicans for rejecting deal. Obama has rejected thatassertion.

Democrats have charged that Boehner has his ownself-interested reasons for avoiding a deal before Jan. 3, whenthe House elected on Nov. 6, is sworn in and casts votes for anew speaker.

Democratic Senator Charles Schumer of New York said on NBC's"Meet the Press" that Boehner has been reluctant to reach acrossthe political aisle for fear it could cost him the speakershipwhen he runs for re-election. "I know he's worried," saidSchumer.

Boehner, who so far has no serious challenger for the job ofspeaker, has said that he has no such concerns.

Such finger pointing has been under way since Congressreturned after the election, but it has gained intensity in thepast few days, with the heightened prospect of plunging off thecliff.

Congress started the clock ticking in August of 2011 on thecliff. The threat of about $600 billion of spending cuts and taxincreases was intended to shock the Democratic-led White Houseand Senate and the Republican-led House into bridging their manydifferences to approve a plan to bring tax relief to mostAmericans and curb runaway federal spending.

The most immediate impact could come in financial markets,which have been relatively calm in recent weeks as Republicansand Democrats bickered, but could tumble without prospects for adeal.

Markets will be open for a half-day on Christmas Eve, whenCongress will not be in session, and will be closed on Tuesdayfor Christmas.

Wall Street will resume regular stock trading on Wednesday,but volume is expected to be light throughout the week withscores of market participants away on a holiday break.

If Congress fails to reach any agreement, income tax rateswill go up on just about everyone on Jan. 1. Unemploymentbenefits, which Democrats had hoped to extend as part of a deal,will expire for many as well.

In the first week of January, Congress could scramble andget a quick deal on taxes and the $109 billion in automaticspending cuts for 2013 that most lawmakers want to avoid.

Once tax rates go up on Jan. 1, it could be easier to keepthose higher rates on wealthier taxpayers while reducing themfor middle- and lower-income taxpayers. Lawmakers would not haveto cast votes to raise taxes.

Some lawmakers expressed guarded hope that a short-term dealon deficit reduction could be reached in the next week or so,with a longer, more permanent deal hammered out next year.

But a short-term deal would need bipartisan support, asObama has said he would veto a bill that does not raise taxes onthe wealthiest Americans.

Democratic Senator Kent Conrad, chairman of the BudgetCommittee, said Obama and Boehner are not that far apart andthat both sides should keep pushing for a long-term big deal.

"I would hope we would have one last attempt here to do whateveryone knows needs to be done, which is the larger plan thatreally does stabilize the debt and get us moving in the rightdirection," Conrad of North Dakota told Fox News Sunday.

But most Republicans are now looking past Jan. 1 to whatthey consider their next best chance of leveraging Obama formore cuts in the Federal budget - a fight over the debt ceiling expected in late January or early February. At that time, theadministration will need Congress' authorization to raise thelimit on the amount of money the government can borrow.

"That's where the real chance for change occurs, at thedebt-ceiling debate," Republican Senator Lindsey Graham of SouthCarolina said on "Meet the Press."